Why do we need a chartered accountant in Israel?

Chartered accountant in Israel - Dray&Dray accounting firm

Companies must appoint a certified public accountant in Israel.

In accordance with Section 154 of the Companies Law in Israel - חוק החברות, a limited liability company, otherwise known as an LLC - חברה בעמ, is obliged to appoint a Certified Public Accountant in Israel. A Chartered Accountant is a person outside the company whose role is to check the accuracy and regularity of the annual accounts drawn up by a company or other institution, and to do this by carrying out an accounting and financial audit.

What exactly is an accounting audit?

An accounting and financial audit is an examination of a company's financial statements. (of an institution, foundation, association, or any organization with accounting systems). Its purpose is to verify the accuracy of the accounts, their regularity and conformity, and their ability to reflect a true and fair view of the financial situation and accounting actions of the audited entity. This examination is carried out by a professional called a "Chartered Accountant".

The independence of the Chartered Accountant, the backbone of the economy.

In order to be credible, this Chartered Accountant must be independent - בלתי תלוי, which means that he must not be subject to the company's control, but on the contrary, must be able to exercise his activity as independently as possible. Indeed, today's entire economic market relies on the independence and sincerity of the chartered accountant's work.

Why does today's economy rely on chartered accountants?

Imagine you have a sum of money you'd like to invest, say NIS 5,000,000. You have several choices:
  • Put it in the bank, and earn around 1% annually, or 50,000 NIS /year.
  • Buy and rent one or more apartments, which will earn you between 3 and 4% per year, on average. That's between 150,000 and 200,000 NIS/year.
  • Invest this money in a company (whether listed on the stock exchange or a simple start-up) with exponential growth potential, sometimes reaching 100% in annual profitability, enabling you to double your capital every year.
As you can see, we've chosen to start from the least risky solution to the most risky, but also from the least profitable to the most profitable. Now let's say you're prepared to take a controlled risk, and you want to invest your money in a company with strong growth potential. Before investing this large sum of money, you'll need to analyze the balance sheets of this "miraculous" company. But there are two important questions here:
  • How can you be sure that what is written in black and white on the company's balance sheet is reliable?
  • Does a company's balance sheet really reflect its economic situation?

Read also: Guide to doing business in Israel

The solution: Appoint a Chartered Accountant in Israel.

To solve this problem, the current legal system has decided to appoint a person independent of the company. This is the Chartered Accountant, whose job it is to verify the accuracy and reliability of the company's balance sheet. Thanks to the work of the Chartered Accountant, you can find out whether what is written in the balance sheet really reflects the financial health of the company in question.

Just because it's kosher doesn't mean it tastes good.

To conclude this article, we have decided to quote Professor Hertzl FatalProfessor of Accounting, Dean of the Faculty of Management in Israel :
When the chartered accountant certifies that what is written in the balance sheet is reliable. This does not necessarily mean that you should invest in the company. It only means that what is written in the balance sheet reflects the company's economic situation. If you want to know whether or not to invest, you need to carry out an in-depth balance sheet analysis. As a comparative example, when you go to a restaurant. You check whether the restaurant is "Kosher", by checking whether it has Kosher Teudate. This Touda certifies that what's served on your plate is kosher. But not necessarily that it will taste good.



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Fax: 02 631 9005
Email : office@cpa-dray.com

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